Evaluating Investment Results

During the first half of 2010, markets have continued to behave erratically. After the MSCI All Country World Index (or ACWI) bottomed in March of 2009, the index experienced an incredible rebound of 92% through April 14th of this year as shown in Figure 1.1 Since the recent April 14th rebound peak, the ACWI has declined 17% through June 30th. Some believe it’s normal to see this kind of pullback after the incredible rebound in the market, while others believe it is a sign that we are not out of the global recessionary woods yet. The market is adjusting prices daily in hopes of making the right guess about future prospects. Our advice is to stay the course with a portfolio that is designed to meet your long term objectives. One of the necessary steps in determining if your portfolio is positioned to meet your long term objectives is to review its performance.

Studies done on investor behavior, and ensuing investment results show that most individual investors have failed to keep up with inflation over the last 20 years. Why has this happened? A more interesting question is why has this happened during a time when access to information and portfolio management technology has exponentially increased? Think about how our access to information has changed over the last 20 years. When pausing to reflect on this, it’s astonishing that we could survive without the flood of electronic information we now enjoy. Yet, in spite of all the life enhancing tools we have as a result of the technological revolution, the average investor is no better off.


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